India's borrowing bill drops as economy keeps its cool
New Delhi: The
Central government
's borrowing cost has moderated in recent years, reflecting the country's robust
macroeconomic fundamentals
, proactive policy measures, and sustained
fiscal consolidation
, a senior government official said.
The weighted average yield for the government securities (primary issuances) from FY21 to FY25 stood at 6.72%, way below that of 8.09% between FY10 and FY14, he said. The yield in FY25 eased to 6.96% from 7.24% in the previous year. Even for the outstanding stock of dated securities, the weighted average coupon dropped to 7.24% between FY21 and FY25 from 7.91% during the UPA-II period. The coupon declined 4 basis points in FY25 from the previous year to 7.25%.
Meanwhile, the weighted average maturity of dated papers--both for primary issuances and outstanding-increased between FY21 and FY25 from the UPA-II period, "signalling moderation of the rollover risk", the official said.
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He added that the spread between the yield on 10-year
Indian government securities
and that on the US bonds narrowed to 183 basis points as of June 16 from 314 basis points in mid-September 2024.
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"The spread narrowed primarily due to reducing inflationary differentials, greater investor confidence in the Indian economy, and inclusion of G-Sec in various bond indices," the official said.
The Indian bond yield remained relatively stable in H2 of FY25 "with a softening bias," while that in some other emerging market economies such as Brazil and South Africa, moved up, he said.
The official said the government took care to conduct its market borrowing programme in the last fiscal year in a non-disruptive manner.
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